Whatever the case, underpayment of wages and super has become a national scourge that is costing the national economy dearly.

In a submission to the Senate inquiry Ken Rosebery, the boss of franchise chain the Cheesecake Factory, pointed the finger at franchisees chasing profit and weak enforcement by the regulator.

“I can recall perhaps two visits by the Fair Work Ombudsman [FWO] to any of our franchisees over the past 10 years," he said. "Franchisees consider the risk of an audit by the Fair Work Ombudsman as very low."

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The Cheesecake Factory, which has 225 franchised stores, sales of $155 million and 2300 workers, said compliance came at a cost.

Rosebery says in the past five years the company has beefed up its compliance with wages and super, but compliance didn't come cheap. It costs almost $1 million a year, or about $400 for every employee.

Franchisees consider the risk of an audit by the Fair Work Ombudsman as very low.

— Cheesecake Factory CEO Ken Rosebery

The added cost makes it harder to compete with non-compliant rivals.

Then came the bombshell: “We have multiple examples in Australia where our analysis of the cost of sales and competitor pricing leads us to conclude that the competitor is achieving lower wage costs through non-compliance and in many cases exploitation of vulnerable workers on student visas.”

Unpaid super is also rampant. Minister for Financial Services Jane Hume recently estimated that an amnesty on unpaid super would result in at least $160 million of super being paid to Australian workers who, without the amnesty, “would otherwise miss out”.

Industry Super Australia (ISA) estimates that almost 2.8 million workers, or almost one in three, are being short changed almost $6 billion a year in super, which is equivalent to an average $2070 a year in underpayments.

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They are staggering figures, but so too are estimates from the Queensland government that wage and super theft affects one in five workers, robbing them of billions of dollars a year.

The Victorian government estimates are similarly alarming with one in two hospitality workers being underpaid and citing similar figures for the retail, beauty and fast-food sectors.

ISA, which is on a mission to fix super, released exclusive data to The Australian Financial Review which show the worst 10 postcodes for super underpayment, including no payment.

Sydney south-west, which includes the suburb of Liverpool, ranks as the worst postcode with more than 13,000 workers underpaid super, followed by Darling Downs in Queensland, which includes Toowoomba, then Western Melbourne, which includes Point Cook.

Too little impact

The data become even more sobering when the victims are profiled. About 1.6 million men lose $3.8 billion a year in super and 1.3 million women lose $2 billion a year in super contributions.

Workers under the age of 30 were a third more likely to be ripped off and 43 per cent of labourers, machinery operators and drivers miss out on more than $800 million a year in super.

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Over the years there have been a number of inquiries into underpayments, which have had too little an impact. The scandals keep on rolling because of a weak regulator, penalties that are still too light, a franchise system that is badly in need of an overhaul and deficiencies in the protection of super.

The government believes the panacea is the imminent introduction of legislation to criminalise those engaging in super and wage underpayment.

George Calombaris has been caught up in a wage underpayments scandal. Simon Schluter

Industrial Relations Minister Christian Porter recently said he was considering whether to require companies caught underpaying to display “naming and shaming” notices in their business.

It is a good start, but criminalising companies that deliberately rip off workers won’t be easy. And naming and shaming will work only if the company is forced to put the notice where it can’t be missed.

Wage underpayment scandals have been going on for decades. The issue came to prominence in August 2015 with the 7-Eleven wage fraud scandal which resulted in the company paying back $160 million in wages and super.

But the scandal had also spread to blue-chip corporations including Woolworths, ABC, Coles, Target and Bunnings, along with some well-known restaurants and their celebrity owners, such as George Colombaris and Heston Blumenthal. They all blamed it on payroll errors.

The brutal reality is shouldn’t be happening. Companies should have better systems in place and there should be better enforcement.

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If the award system is too complicated it should be simplified.

It is why another inquiry is necessary to get to the bottom of why underpayment of wages and super happens, the impact on the economy and how to fix it.

ISA has been lobbying for super to be included in the National Employment Standards (NES) to give workers the legal right to pursue unpaid super in the Fair Work Commission rather than having to go through the Australian Taxation Office (ATO). This is especially important in the case of insolvency.

The following case epitomises why the system needs changing. It involves an electrical contractor in Queensland with more than 30 employees. In 2018 the workers went to the Fair Work Commission to complain about unpaid super. They then reported their concerns to the ATO, which came up with an agreement with the contractor to repay the workers in monthly instalments from May 2018 until May 2020.

After a few months the payments started dying up and holiday loading and other penalties also weren’t being paid.

The company then went into liquidation. Another company was set up in the owner's wife’s name and the same employees were hired to work on the same project. The workers, in need of a job, couldn’t afford to turn it down.

Calls were put into the ATO and a letter was written to ASIC in September 2019 saying: “I am of the strong belief … [the company] is evading having to pay wages, superannuation and setting up new companies to avoid having to do so. I would ask that ASIC look into this matter as soon as possible please. I look forward to hearing back from ASIC around this matter.”

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A month later, ASIC wrote back that it had decided not to investigate the phoenixing. “ASIC believes that these types of disputes are best resolved through communication with the insolvency practitioner appointed to the company; not with formal intervention by ASIC investigators.”

The old company was put into liquidation and the new company continues to trade. The workers never received their super entitlements and they are now worried that the new company is set to rip them off afresh.

For the Cheesecake Shop boss, one answer to fixing the underpayment problem is scrapping the 20-hour-a-week limit on foreign students.

“The student visa working-hour limitation only fuels the black economy, enables exploitation and does little if anything to minimise the impact on employment of Australian residents," he said. "This would remove a significant motivation for non-compliance.”

There is a lot to do to fix the system. If we don’t the scandals will keep coming and the excuses will start to wear thin.

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